EUR/USD Forecast: 3 reasons for King Dollar's comeback, nearing uptrend support

The EUR/USD is trading in the lower half of the 1.1600 handle, extending its falls. The move is solely driven by the US Dollar and the greenback has three reasons to rise.

1) Treasury Yields

The 10-year Treasury bond yields topped the round level of 3% on Wednesday, the highest level in six weeks. The rise of the global benchmark was driven by the announcement from the Treasury Department. The funding needs of the US have risen due to tax cuts and increased spending. Flooding the markets with bonds lowers their value and lifts yields.

2) Fed Decision

The Federal Reserve left the interest rates unchanged as broadly expected. They made minimal tweaks to the accompanying statement but these were upbeat. They now see the economy as "strong" rather than "solid". In addition, they have acknowledged that inflation is around the target. The previous wording regarding inflation talked about it "approaching" the target. 

The Fed is set to raise rates in September. Markets see roughly an 80% chance of that happening.

3) Trade wars

The White House confirmed early reports that the US plans to raise the planned tariffs on China from 10% to 25%. The duties are set to be slapped on no less than $200 billion worth of Chinese goods. Negotiations are happening only on a low level. The dispute between the world's largest economies is weighing on stocks and the risk-off atmosphere benefits the US Dollar against all currencies, with the exception of the safe-haven Japanese yen.

Euro-zone data has been OK with final Manufacturing PMI confirmed at 55.1 points on Wednesday. There are no significant data points for Europe due today.

In the US, weekly Unemployment Claims are projected to remain at low levels. The bigger event is tomorrow, with the publication of the all-important Non-Farm Payrolls.

The absence of top-tier indicators today leaves the focus on the three main themes mentioned earlier.

EUR/USD Technical Analysis - Uptrend support getting close

The bias is turning bearish against the pair. The Relative Strength Index in the 4-hour chart has dropped but remains above the oversold territory. Momentum has also tipped lower. 

The EUR/USD remains in the narrowing wedge after an upside attempt failed on Tuesday. After the recent drops, uptrend support is getting close, waiting for the pair just above 1.1600 at the time of writing.

Immediate support is at 1.1620 which was a low point last week. 1.1575 was the trough in the previous week. A breakdown will open the door to 1.1508, the lowest level that was seen this year. 

1.1665 capped the pair earlier in the week before it made an attempt to move higher. 1.1720 was another stepping stone on the way up and also a swing high in June. 1.1750 is a significant hurdle after capping the EUR/USD no less than four times in recent weeks.